November 4, 2021

This new bank account for startups promises to double your VC raise

And Capchase says the capital is cheaper than anything else on the market

Tim Smith

4 min read

Congratulations, you’ve just raised equity from the VC of your dreams. You just need that sweet cash in your bank account and you’re ready to go, right? 

Not so fast. Is that really the right account for your money? London and New York-headquartered startup Capchase has launched a new bank account for startups that’s promising to double your VC money for a relatively small cost.

Founded just last year, the company says it has already made $800m of funding available to founders in Europe and the US, using a non-dilutive model for startups with recurring revenue.


How it works

The new product, Capchase Earn, is designed for startups with cash in the bank, and allows founders to deposit their funds into a Capchase account. It will then essentially offer a loan with a 2% annual cost to more than double that money.

If the startup has annual recurring revenue, the maximum loan amount equals the sum of the cash in the bank and the startup’s annual revenue added together.

So if you’re a startup that’s just raised €250,000, with annual recurring revenue of €25,000, you can take out a loan of €275,000, which will cost €5,500 a year.

If a company is raising money to last them for 18 to 24 months [...] they have a tonne of spare cash that’s sitting there not generating anything

Speaking to Sifted exclusively ahead of the launch of Capchase Earn, Capchase founder and chief executive Miguel Fernandez explained the thinking behind the new product.

“If you think about it, if a company is raising money to last them for 18 to 24 months, they're selling a big chunk of the company now. And then that money is gonna stay in the bank account in a really crazy way until 24 months from now. So they have a tonne of spare cash that’s sitting there not generating anything,” he says.

“Why don't you use it to unlock much, much cheaper cash, and then run the business on Capchase funding which is way, way cheaper than equity.”

Fernandez also claims that the 2% cost of the capital is four to eight times cheaper than competing recurring revenue financing options. And compared to revenue-based finance, which typically costs founders 20% year by year, it’s certainly good value.

Depositing money in the account will also earn founders 3% interest on their funds, protected by the Federal Deposit Insurance Corporation for US-based customers.

Alternatives to equity

The new product from Capchase joins a growing number of options for founders looking to raise money without giving away more company equity.

Fernandez is clear that Capchase’s financing solutions aren’t necessarily designed to replace equity VC, but offer alternatives to endlessly diluting ownership whenever a startup needs more cash to grow.


“You should still try to get the best VCs that you can to help you in your mission. But then you should multiply the force of that equity,” he says. “Your equity is super expensive. Equity in the best companies costs at least 100% year by year, on the other hand, Capchase costs 2%.”

One of Capchase’s beta customers for the new product, freight logistics startup Nowports, said that it represented a great way to make use of idle cash.

“Capchase Earn was a great option for us because the interest rate helped us make use of the capital we didn’t immediately need. When you raise funding, you have a lot of money sitting idle in your bank. You need to take action with that money, so that it starts producing,” says Nowports finance manager Diego Coria.

Change in mindset

Fernandez believes that startups with recurring revenues are only just beginning to realise the real value of their earnings, and are starting to adopt the range of financial products available to them.

“It doesn't make sense that SaaS businesses are not using financial products. They're just using equity for almost everything, and then a credit card,” he says. “They just use that super expensive money to grow when there are other ways of growing that are much cheaper.”

You should still try to get the best VCs that you can to help you in your mission. But then you should multiply the force of that equity

Capchase Earn isn’t the only challenger bank account designed for startup founders: Tide, Starling, and Cashplus all offer products designed for business operators. Capchase, however, believes it is the only one offering bespoke solutions for startups with recurring revenue.

And given the power of revenue to help raise financing, Fernandez hopes that new founders will be able to hold onto more of their company than those that have previously relied on equity.

“Founders accept that when they IPO the average founding team owns 15% of the company. That’s because they use VC money constantly to grow. Then the faster you grow, the more money you burn, the more money you need, right? So then that's why they keeps selling chunks of the company. You don't need to sell that much, or that often.”

Tim Smith is Sifted’s Iberia correspondent. He tweets from @timmpsmith 

(This article was amended on 04.11.21 to reflect the fact that it is specifically US-based customers that are protected by the Federal Deposit Insurance Corporation)

Tim Smith

Tim Smith is news editor at Sifted. He covers deeptech and AI, and produces Startup Europe — The Sifted Podcast . Follow him on X and LinkedIn